Korea in an uncertain world

By John Burton

"Stop the World ― I Want to Get Off" was the name of a 1960s Broadway musical. It also sums my feelings in this year of Trump and Brexit.

What the world ― at least the developed part of it ― is witnessing is a populist backlash against three global trends that have accelerated since the early 1980s.

The first is globalization. The introduction of economic reforms in China in 1979 followed by the downfall of the Soviet empire a decade later created favorable conditions for the growth of free trade agreements and increased manufacturing offshoring to developing countries, particularly in Asia. Jobs disappeared in the industrial centers of the northern Midwest states of the U.S. and the engineering belts of the English Midlands. Factory workers there were left scrambling for low-paid service jobs.

The second is the growth of automation, with the rise of the digital economy in the 1980s. Many tasks are now being increasinglyperformed by computers or factory robots. Displaced factory workers will soon find that even getting a low-paid service job at a fast food outlet difficult. Pizza Hut, for example, recently announced that robots, nicknamed Pepper, will start serving customers at some of its restaurants in Asia by the end of the year. Self-driving vehicles will soon eliminate jobs for taxi and truck drivers.

Even formerly safe jobs are under threat by technology. Software and algorithms will eventually be able to perform many of the routine services now provided by bankers and lawyers, while medical robots may one day replace surgeons.

Wendell Wallach, a professor at Yale University, recently estimated that 47% of existing jobs in the U.S. could be replaced by automation. "When the World Bank used similar methodology, it came up with 69% for India and 77% for China. If that's truly the case, we are talking about tremendous job losses," he said.

The third global trend under fire is the spread of the neo-liberal ideology of free markets and distrust of government that was promoted by the Reagan and Thatcher administrations in the 1980s. The result has been the fraying of a social safety net for those who have lost well-paying jobs, while the rich have grown richer.

Richard Rorty, an American philosopher, warned nearly 20 years ago that something like this would happen in "old industrialized democracies" as "members of labor unions, and unorganized unskilled workers, will sooner or later realize that their government is not even trying to prevent wages from sinking or to prevent jobs from being exported. Around the same time, they will realize that suburban white-collar workers ― themselves desperately afraid of being downsize ― are not going to let themselves to be taxed to provide social benefits for anyone else. At that point, something will crack. The non-suburban electorate will decide that the system has failed and start looking around for a strongman to vote for."

The deepening resentment among working-class and middle-class voters explains the rise of Trump in the U.S. and the rejection of British membership in the EU, fueled by racism and nativism, with the aftermath of the 2008 global financial crisis providing a crucial trigger for protests.

Korea is not immune to these destabilizing developments. What would happen to the country's export-dependent economy if free trade agreements start to unravel and its key overseas markets, such as the U.S., raise tariffs to protect their domestic industries?

This is not fanciful. Marcus Noland with the Peterson Institute for International Economics in Washington has identified at least six U.S. laws that Trump could at least temporarily invoke to suspend trade agreements.

Korea would find it difficult to rely on domestic demand for future growth as manufacturing exports dwindle since households are already burden by high debts related to mortgages and borrowings for education.

There is also growing polarization between the rich and poor in Korea as more workers are forced to accept "contract' jobs rather than full-salaried positions. Automation, ironically, may prove partially beneficial for Korea in solving the economic challenges posed by a rapidly aging population and a shrinking workforce.

But Korea would still need to deal with the social service costs of caring for the elderly when its welfare and pension systems are underdeveloped compared with the U.S. and Europe.

Korea so far has been one of the beneficiaries of globalization. But it will soon need to address many of the same issues that confront the U.S. and Europe. Korea enjoys one advantage in that it possesses a greater degree of social solidarity than many Western countries due to a variety of factors ranging from the cohesive influence of neo-Confucianism to a deep-seated us-versus-them view of the outside world.

But even this sense of unity may not last if accelerating economic and technology changes increase income inequality and undermine traditional institutions.

John Burton, a former Korea correspondent for the Financial Times, is now a Seoul-based independent journalist and media consultant. He can be reached at johnburtonft@yahoo.com.atimes.co.kr